The RIA succession paradox: Why it’s not about you … it’s about the brand

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According to FA Insight, 25% of financial advisors will retire within the next decade. Yet, only 29 percent of advisors have defined or implemented a succession plan, according to a Moss Adams study.

No doubt, lack of planning places a large portion of value at risk — equity that an owner has spent a lifetime building and now, because of ego or short-sightedness risks destroying. Call it “the succession paradox.” The very skills that lead to success can also thwart an RIA’s ability to thoughtfully plan and maximize the value that can be ultimately extracted from the business.

That’s because RIAs rise to success based on their own ability to attract talent, build referral networks, see emerging trends and cater to a market. In their prime earning years — say 45 to 55 — they are indeed Masters of their Universe and the central force in their own success. And there lies the trap.  The paradox rests in the misguided notion that past performance is an indicator of future success, regardless of how the world changes and whether a younger, more dynamic generation might be better suited for shifting sands.

Which brings us to the power of brand and its implications on the long-term equity of an RIA. Too often, brand building is relegated to short-term, current marketing efforts. It’s a simple response to an immediate need for building awareness, referrals, or pipeline and winning assets under management. But brand is something much more permanent and valuable. More than any other factor, brand outlives the productivity of an individual RIA, creating value independent of personal networks, effort, and market presence. Yet brand — and brand building — is perhaps the most overlooked component of succession planning, an after-thought that is rarely fully realized as goodwill.

Don’t let that happen. Here, in cold, stark reality, are the keys to building a brand that safeguards and enhances equity at the point of sale or succession:

  1. No one cares about your name. Not when the time comes to sell your practice. It’s the value of the organization and its brand that truly counts. Consequently, it’s important to separate your business brand from you the person. The overuse of a principal’s personal name in the firm’s brand suggests a kind of intimacy that undermines scalability. The preponderance of owner-named RIAs dates to a brokerage paradigm that allowed captive brokers at wirehouses like Morgan Stanley to create their own teams. It really has little value in the succession equation. So ratchet it down. Phase it out. Consider naming options that promote the entire enterprise — not just you.
  2. Promote, and publicize the organization. Invest in extending and establishing the credentials of the team … their expertise and experience. Develop a marketing and publicity plan for each of your key players. Where will they play? Who will they target? Where will they be seen? What boards, charities and organizations must they penetrate? Building the brand of an enterprise is all about winning exposure for professionals at every level within your organization. Push to get your people out in the marketplace, quoted in the media, published, and in front of audiences as a way of demonstrating the value of the entire organization.
  3. Find an organizational differentiator and over communicate it. People mightcome and go. But investment philosophies and principals remain. Work hard to develop your key messaging for the entire organization and socialize among your staff. What differentiates your organization? Is it a commitment to service? How about transparency? Is it your demographic or investment approach? Is the firm conservative? Aggressive? Find it. Know it. Share it with everyone in the organization and then empower them to take that message to the market as a way to amplifying the value of the entire enterprise.
  4. Consistency and accuracy. Just do it. And do it consistently. To build brand, you must establish the bounds of your look and feel and religiously, obsessively stay in it. What is the key message to be delivered in every media interview? What is the precise color of your logo? Why is your tagline what it is? What is the story behind the firm, its reason for being? Consistency highlights the organization and not the individual, a key to building the image and value of your business as a whole.
  5. Guard and defend your online image. It’s your first point of credibility — a check point for anyone seeking to do business with you.  How’s it look? Is your web site static and dated? Full of empty words? Forgettable and exchangeable, identical with any number of your competitors? Web sites are quickly being replaced with more dynamic blog-based online presences that allow organization to socially engage and share news and views, all the while promoting the value and expertise of the entire team. Don’t simply update your web site.  Destroy it and replace it with an online presence that communicates the quality of your institution — not just the glory of a few.

A lifetime of work distilled to a single point of valuation. Selling or succeeding your firm is a matter of creating the greatest possible value, and branding plays a vital role in that equation. By separating your personal brand from that of the organization, you can create a highly attractive platform for acquirers or the next generation employees who can appreciate the size of the opportunity and are willing to pay more for the right to seize it.